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The sharing economy brings anarchy to the supply chain

What will it mean for the supply chain if suddenly one out of every two drills is sold between consumers themselves or if three families share one lawn mower? The emergent sharing economy will fundamentally change supply chains. How are all those products going to get from one consumer to the next?

Twenty years ago already, my good friend Tom described to me how he travelled somewhere different each month, sharing his house with other nice people via the Internet each time. He would go to San Francisco, Hong Kong, Paris, and New York. I thought it was a strange idea to let people you didn’t know stay at your house. Tom always came back with the most entertaining stories. He liked sharing.

Sharing

Tom is not the only one; the sharing economy is expanding quickly. We are sharing our living rooms as unique restaurant locations. We are sharing our cars and our boats. And we are sharing our household things and our manpower. “Not sharing anything – that’s what you call poverty.”

Not only are we sharing things more often, but we are buying from and selling to each other more and more often too. Consumers are still buying more things on marketplaces such as eBay than on all web stores put together.

Parcels: a logistical challenge

The first logistical challenge is how we are going to get all those parcels in a smart and environmentally sound way from one consumer to the next – and back again too, in case we are sharing the products temporarily: local for local.

The traditional parcel-delivery companies are now facing competition from smart IT clubs such as UberRush, a sister of Google’s taxi planner Uber, Shutl, that was taken over by eBay and GoGoVan. They arrange the delivery of a parcel just as easily as you can book a taxi. That taxi can come pick up and deliver your parcel immediately, or they can pick it up now and deliver it later today or tomorrow. Experienced local couriers do the work.

Planning is no simpler

If one out of every two products is circulating in the sharing economy, that’s also going to have direct consequences for the supply chain upstream. As a supplier, how will you manage to maintain control of the price, the sales volumes, the product guarantees and the liability? It is anarchy in the supply chain.

Sales and operations planning are growing more complex. With every new product introduction, you need to ask yourself what the second- and third-generation market segments are going to do. The interplay among supply-chain management, product management and marketing is crucial.

Revenue models

The sharing economy is also stimulating new revenue models based on use rather than ownership and consumption. The sharing economy is feeding the development of the circular economy. We can see examples of this with Car2Go, ShareBike, the printers of Ricoh, the carpets of Desso, Splash Lease’s white-good rentals to students in the Netherlands and the owners associations of condominiums that opt to install solar panels from energy provider Greenchoice.

With those revenue models, you can maintain control as a supplier on the entire service life of the product and the market. But then you’ll need to be able to offer a fitting logistics concept for that lifespan; performance based logistics. Since the user only needs to pay for the delivered service, it is important to make high-quality products that will continue to work for a long time without repairs or replacement. But you will also need to know precisely where your products are, how they have performed and what they need.

Fair sharing

For Airbnb, but also for other providers in the sharing economy – in contrast to the situation in the traditional economy – it’s mainly about reputation, trust and allowing things to happen. The price is only of secondary importance. The ease with which we can now do business with each other means that swindlers have also found their way into the sharing economy. If it turns out that few are actually sharing and many are simply taking, then the sharing economy simply isn’t working. Fair sharing is the best policy.

The sharing economy means supply-chain anarchy and raises a lot of questions about legal aspects, taxes, regulations and consumer protection. We are still missing a good set of rules. How do we deal with guarantees and product liability? Surely you will want to know whom you’re dealing with? Who is going to keep track of where all the products are in the supply chain? Will the logistics service providers be the new “border guards” of the sharing economy? We are only just at the beginning in terms of all the changes that the sharing economy will entail for logistics.